what is swaps

• In finance, a swap is an agreement between two

counterparties to exchange financial instrument,
cashflows, or payments for a certain time. The
instruments can be almost anything but most
swaps involve cash based on a notional principal
amount.
• Swaps are commonly used in financial
markets for various purposes, including
managing risk, hedging, and speculating on
interest rates, currencies, and other financial
variables.
Types of swaps

1.Generic / conventional/ plain vanilla/ interst rate/

fixed to floating swaps.

• They allow two parties to exchange fixed and floating cash

flows on an interest-bearing investment or loan.
 2.Overnignt index swap:
• To exchange 1 day LIBOR or MIBOR with a fixed rate

3. Basis swap:
• Basis swap is a swap which are paying the bot
sides have a floating rate structure.

• Fixed - fixed.
• Fixed - floating.
• Floating - fixed.
• Floating - floating.
.
 4. Forward swap:
• A swap contract entered today to be started
on a future date.

T0 T1 T2

y elaborate on what you want to discuss.

date of swap starts swap ends

forward swap
 5. Amortising swap:
• paying of debt with fixed payment schedule
in regular installment over a period of time.
for example: EMI

6. Acreting swap: Notional

principle is increase over different
intervals.
example: original contract has additional
borrowing at different intervals.
7. Roller coster swap:
f.,

• Notional principle will keep increase / decrease as per

pre-determined schedule.

8. Commodity swap:
• commodity swap involve the exchange of cash flows
based on the future price of the commodity
 Currency Swaps
• A currency swap is an agreement in which two parties exchange
the principal amount of a loan and the interest in one currency
for the principal and interest in another currency.
Example of a Currency Swap. One of the most commonly used
currency swaps is when companies in two different countries
exchange loan amounts.
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THANK YOU

P. PRAKASH
Reg No: P221835
MBA 2nd YEAR,CUTN